House of Commons - European Scrutiny

Select Committee on European Scrutiny Fifteenth Report

2005 average

Annex 1: Analysis of reductions in wholesale and retail roaming prices following announcement for a Regulation

The following paper provides a brief analysis of reductions in wholesale and retail charges for international roaming services. For wholesale, average rates across the EU for 2005 have been used.

For retail, spot prices for January 2006 and January 2007, for making calls back to the UK whilst abroad on three different tariff types (standard contract; Pay-as-you-go; and a selection of more recent tariffs) for all five UK network operators[14] have been collated and compared. The graphs below set out the analysis for France.[15]

This is a simple and fairly broad analysis, and is only intended to provide an indication of retail and wholesale price movements over the relevant period. Both wholesale and retail prices vary according to a wide range of factors (for example, by route, network used, or particular tariff). The intention is to give a cross-section of what is actually available.

Wholesale

Indicative wholesale rates — January 2006 and January 2007

Wholesale (£ per minute)
operator

2007 rate
% change

Vodafone[16] 0.46 0.30 -35%

O₂[17] 0.65 - -

Orange[18] 0.47 0.30 -36%

T-Mobile[19] - - -

3 0.59 - -

Source: MNO data to Ofcom and DTI 2006/2007

Wholesale charges are subject to commercial negotiation and vary widely dependent on a wide range of factors. Headline rates are often subject to discounting on an operator by operator or group basis. Because of this wholesale rates are not routinely, readily available.

Following Commissioner Reding's announcement for a Regulation, several operators have announced reductions or commitments for reductions of wholesale roaming prices. The data in the above table shows significant reductions of over a third for both Vodafone and Orange. T-Mobile's rates are also significantly below what they were likely to have been prior to the Commission's announcement.

To date, discussion at Council has not tended to focus on wholesale rates. We believe that recent proposals for wholesale regulation at between £0.17 per minute and £0.21 is reasonable. The focus for Council discussions has tended to be regulation of the retail level.

Retail

As with wholesale charges retail prices tend to vary widely, which is why we consider that provisions to improve consumer transparency and awareness form an important part of the regulatory proposals.

The charts below offer only a snap-shot of standard (contract and pay-as-you-go) tariffs, plus a number of 'new' tariffs that are available.

The snap-shot example above shows there has been some movement, typically downward, in the standard retail contract and pre-pay tariffs available to consumers. More significant reductions have been achieved through the development of completely new roaming tariffs, shown in the chart below.

This clearly shows that operators have introduced a number of new tariffs, which offer consumer's significant savings over standard rate tariffs for roaming (which have reduced in some cases also). This goes some way to demonstrate that industry is reacting to political pressure to reduce retail roaming prices, and doing so through a combination of reductions to standard rates and through introduction of new innovative tariffs.

Allowing industry to maintain a degree of flexibility to act in this way, whilst also ensuring prices are actually reduced is critical to maintain the correct balance between protecting consumers against unreasonably high prices and allowing operators to vary their tariffs according to different consumers' needs.

Maintaining this balance is precisely the reason for having a dual approach to retail regulation, a consumer protection tariff that would ensure that the most vulnerable consumers were protected, while an average price control would maintain a requirement on operators to continue with price reductions across the board.

In setting an average control however, care must be taken to ensure that incentives on operators to set different rates and develop innovative tariff packages are not lost. If an average control is set at too low a level, then operators may simply set all prices at the same level. Furthermore, there is a higher risk that unregulated prices (potentially even those outside of roaming) may increase.

Supplementary annex

Data tables of retail spot prices for France

Standard contract tariff
operator

January '06
January '07
% difference

Vodafone[20] 0.75 0.75 0%

O₂ 0.85 0.85 0%

Orange 0.70 0.70 0%

T-Mobile 0.75 0.55 -27%

3 0.80 0.80 0%

Source: Ofcom user guide January 2006 and operator websites (2007 data)

Standard pre-pay tariff
operator

January '06
January '07
% difference

Vodafone[21] 0.75 0.75 0%

O₂[22] 0.99 0.99 0%

Orange 1.20 0.70 -42%

T-Mobile 1.00 0.55 -45%

3 1.00 1.20 20%

Source: Ofcom user guide January 2006 and operator websites (2007 data)

[23]New tariffs
operator

January '06
January '07
% difference

Vodafone (Passport)[24] 0.25 0.25 0%

O₂ (My Europe) - 0.35 -

Orange (bundles)[25] - 0.50 -

T-Mobile (Bundles)[26] - 0.45 -

3 (Like Home)[27] - - -